Asia: Alcohol industry in strong position due to rising demand of premiumisation in APAC - Diageo

Alcohol heavyweight Diageo believes that the rising demand for premiumisation in APAC, and in particular economic growth in China, is placing the category in a strong position, the Food Navigator Asia reported on July 3.

Diageo is the owner of many renowned alcoholic brands such as Johnny Walker whiskey, Tanqueray gin and Guinness beer worldwide, and with its global outlook has now zeroed in on the Asia Pacific market as a key one for growth opportunities.

According to Diageo President Asia and Global Travel John O’Keefe, APAC makes up some 20% of the firm’s business at this stage, and with many consumers now on the lookout for premium alcoholic beverages in the name of quality indulgence in this region, this represents a key opportunity for many of Diageo’s brands here.

“We are certainly seeing the demand for premiumisation here and the growth of spirits taking off at an even more accelerated pace than beer growth,” he told the floor at the Diageo Media Day in the brand’s APAC headquarters in Singapore.

“One of the main things driving this is that post-pandemic, consumers are drinking less in terms of volume but instead looking for higher quality to ensure they get the best out of that reduced volume.

“This plays well into our ambitions surrounding responsible drinking, and also bodes well for our many premium products – in fact, Asia in itself is the largest luxury spirits region globally, led by China which is the largest luxury business here for us, not only with our own baijiu brand Shuijingfang but also with scotch as the market for this is growing in the double digits there.”

One of the main factors driving this regional demand is socioeconomical, with rapid rises in middle class consumer numbers across various major markets.

“In China alone we know there are some 10 million new consumers that are entering the middle class every year, and they are looking for more premium products,” he added.

“We are seeing this reflected in the growth of our Rare products business, which encompasses spirits that are above US$250 to US$300 a bottle – China makes up 40% of our business in this category.

“This is not to mention other markets in this region that are also seeing rapid increases in the middle class such as Australia and India.”

That said, O’Keefe highlighted that one of the most significant challenges facing the company is that many of its brands are traditional, longstanding ones with hundreds of years of history, which may appeal to certain consumers but not always to younger ones which are emerging to take up an increasing amount of the market.

“With brands like Guinness, many times these younger consumers will say they don’t want to be drinking something that their parents drink – it can also apply to other brands with long legacies like Johnnie Walker or Tanqueray,” he said.

“So the mission for us with these brands is to make sure that these are cool, relevant and funky in order to maintain relevance with this consumer group – and just as this has been done in markets like North America, we believe it can be applied here too.”

Such is the firm’s confidence in the premium demands of the region that it recently launched yet another such luxury item in Singapore on June 23 this year – the Don Julio 1942 premium tequila.

“Tequila has always been associated with colleges and parties and the like in the past and especially in the 1980s and 1990s, but this is a very different item that we are bringing to Asia,” O’Keefe said.

“This is premium sipping tequila that is certainly much higher quality as it uses much more high quality agave plants that are grown further apart - and it is still expected to be important for parties and events and the like but in more luxurious, sophisticated settings.

“This emergence of premium tequila has been growing for some time in North America due to the influence of Mexican culture and food in that region, and we are bringing this into Asia as we do expect the trend to grow here as well.”

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